You do, however, need to know about financial readiness. So, to honor Veterans Day, I sat with Jeff with USAA. We talked about financial readiness and why it’s important to gain a solid understanding of where you stand money-wise, wise.

He also explains the Financial Readiness Calculator and why it’s a great tool to discover your level of financial preparedness.

So, let’s get on with it, shall we?

What is a Financial Readiness Score (FRS)?

The Financial Readiness Score is basically for people to come in and say, “Hey, where do I stand?” “Where am I at today?” based on this and that data.

It doesn’t necessarily fill in the gaps. It won’t tell you-you’re spending too much money or here’s how to fix it. But it’ll say at least the obvious that you’re spending too much money.

According to Jeff, the end product is a Financial Readiness Score on a scale of zero to 100.

The closer to 100 indicates the better financially prepared a person is.

The tool itself asks a series of discovery-oriented questions. Questions about future expenses and current expenses are just a couple of categories.

It goes as far as asking if you have a Will. After your responses are received, they are weighted and then a probability analysis is generated as a result.

The probability analysis feeds into the score and is constantly updated. USAA’s goal is to have everyone do the questionnaire at least once a year so that they can track and monitor their success rate over time.

There are recommended steps of action that USAA passes along to their members as a result of the Financial Readiness Score, like acquiring an attorney to get a Will done and so forth.

From what Jeff was saying, it almost felt like the software was much like a robo-planner that could be used to ascertain existing financial data (i.e., create the “big picture”). It doesn’t have that human element, of course, but I do this on the front-end when working with my clients.

You still have to take software with a grain of salt because it’s… software. You still have to rely on a human to interpret your data into something meaningful.

Jeff has seen members experience success, but he’s worked with others in the past that didn’t do so well. In these cases, they hadn’t updated their Financial Readiness Score data.

As you update your data, the needle moves, so to speak.

So, it’s fairly sensitive, but again, you need that personal touch to go in and interpret that data.

But future iterations of the software could make it more comprehensive. If someone banks with USAA, they have access to their spending data. Their spending habits then can be integrated into the Financial Readiness Score. Pretty cool.

USAA Product Suite

Cashflow is obviously a huge issue and we’ve talked about it a bunch in previous episodes. Jeff talked a bit about how future iterations could help with that.

He also shared more about USAA’s product suite.

The entire suite of USAA products includes insurance, banking, and investments. As members input data, a mini-financial plan is created. This plan is a valuable tool available to their members for improving their financial readiness at their current state.

The Financial Residency audience may have just finished training and maybe have never looked at their financial readiness score.

They may have gotten a lot of good advice around their personal finances, but have never had a financial plan created. USAA thrives on helping folks like them.

To access USAA’s products and FRS calculator, you have to be a member.

Right now it’s members only.

It’s good to be a member so you can store your data online and integrate it. At this point, the Financial Readiness Score would continue to evolve as time elapses.

I have clients who bank with USAA. I immediately know they have insurance with them too. They have investments. It’s all-encompassing.

I asked Jeff what they attribute that success to because I think that’s quite remarkable.

Jeff has been a member of USAA since 1991 and, for him, it’s the customer service and the folks on the phone when he calls. He knows he’s going to get a consistent story. He knows he’s going to get high-level of customer service. And he knows he’s going to be assessed the right way.

He goes on to explain that USAA is mission-driven and always steps back to evaluate how to best serve their members, particularly those belonging to the military community.

I think that speaks volumes about USAA’s service and products.

USAA and Financial Education

Jeff knows that I love connecting my clients to solid financial education. According to Jeff, when he first started the industry, he was told to read books, read magazines and get that knowledge built up.

Understanding finances nowadays is such a tremendous asset. There is a massive amount of information available to people. Knowledge is one thing, but interpreting that knowledge into practical application is the difficult part.

In addition to fueling your mind, you must rely on someone you trust and has the background to answer specific questions in accordance with the Internal Revenue Code, the current laws and stays abreast with that.

Jeff believes it is a lifelong learning process and that’s where professionals in the financial services industry should make sure they continually stay on top of things and help our clients understand changes in legislation and the potential nuances.

My average client debt is about $283,000 of medical student loans when they graduate. So we’re talking quite a bit of money and most of them, I would say, don’t come out with any financial education.

So I appreciate USAA talking about education at the forefront and encouraging financial discussions.

This is, at least a starting point, to help people begin their discussions.

Be Financially Smart

Everybody is going to make financial decisions that they’ll have to live with. It truly is about making the right ones for your future. The only way to do this is by educating yourself and getting a better understanding of what you need to do to get you closer to your goals.

I think USAA does this really well. In an effort to protect their members from “lending predators” or “unscrupulous people in the industry,” they make sure they help facilitate informed decisions so their members avoid lifestyle creep.

Becoming a Member of USAA

There are certain member criteria for USAA. If your parents were a member, you

become an entitled member. If you serve in the military, the same applies. There are all sorts of ways to become a member especially if you’re a member of the military. USAA wants to help familiarize you with their core products that they know will benefit you in the long run. I encourage you to check them out at www.usaa.com to see if they’re a good fit. If not, hey… I’m a fee-only financial planner. Try my services on for size. Just go here: www.physicianwealthservices.com.